Yves here. Even though the proposed remdevisir price gouging, particularly in light of its underwhelming Covid-19 treatment benefit, has already gotten ample bad press, this post explains why the picture is even worse than you thought. Generally speaking, the government funds roughly 30% of Big Pharma R&D. The authors estimate that for remdevisir, the Federal contribution was over 80%.
By Fred Ledley, Professor of Natural & Applied Sciences and Management, Bentley University; Ekaterina Cleary, Lead Data Analyst, Center for Integration of Science and Industry at Bentley University; Zoë Folchman-Wagner Lecturer, Natural and Applied Sciences Department at Bentley University; and Matthew Jackson, Research Fellow, Center for Integration of Science and Industry at Bentley University. Originally published at the Institute for New Economic Thinking website
What is a fair price for Gilead’s remdesivir as a treatment for COVID-19? This has been a burning question in the media and policy circles from the moment Gilead received Emergency Use Authorization (EUA) for the drug as a therapy for COVID-19. Only a few days ago, Gilead set the Wholesale Acquisition Priceof a course of remdesivir for treating COVID-19 at $390/vial for governments of developed countries, approximately $2,340 for a course of therapy, and $520/vial for private insurance companies, or approximately $3,200, for a course.
What goes into setting the price of remdesivir? Public advocates have argued that the drug should be made available at cost due to the public health emergency. Wall Street analysts have publicly pressured Gilead to generate returns on remdesivir similar to its other blockbuster products such as Sovaldi and Truvada. Health economics analyses have estimated the “value-based” price from the clinical and cost benefits of treatment with remdesivir as well as the quality-adjusted value of human life (QALY). The price set by Gilead, in fact, falls comfortably within the range of “cost-effectiveness” reported in the latest update of these estimates from the Institute for Clinical and Economic Review (ICER).
This discussion of how Gilead would price remdesivir begs the question of why this is Gilead’s decision. The underlying assumption is that Gilead can set the price by virtue of having invested in the design of this chemical compound, discovery of its biological effects, demonstration of its effectiveness, and development of processes for large scale production of the drug. Gilead estimates that, by the end of 2020, it will have invested more than $1 billion in the development and manufacture of remdesivir.
Gilead also owns a patent describing the chemical structure of remdesivir and its application for treating Coronavirus infection. This means that the US Patent and Trademark Office (USPTO) found that remdesivir’s chemical composition and its clinical applications were patent-eligible subject matter, novel, not obvious, had utility, that the recitation of the invention enabled use of this compound as a medical therapy, and that the individuals listed on the patent, all Gilead employees, were legally entitled to be listed as inventors. By law, this confers ownership of the product to Gilead for a determined period of time.
Patent law, however, does not capture the full account of remdesivir’s discovery and development. Our recent research shows that the Emergency Use Authorization of remdesivir was enabled by decades of research on both the drug’s biological target and the pharmaceutical chemistry of related chemical structures. Our work also shows that National Institutes of Health (NIH) contributed as much as $6.5 billion to this research.
Modern drug discovery and development begins with basic research on the molecular mechanisms of biology and disease. This research uncovers the processes by which the body grows and heals, how viruses infect human cells and proliferate, and how the body’s immune system responds. Most importantly, this research identifies specific proteins that are actively involved in a disease process or the body’s healing response, and suggests strategies for how a drug might be designed to attach itself to a specific protein and alter its function. Such a protein is termed a drug target.
Typically, decades of basic research are required after a potential drug target is identified until enough is known about its structure and function to successfully develop a drug targeting that protein. Our previous studies suggest that, on average, it takes more than 30 years for such research to mature, and that very few products based on this research are approved before such work reaches a maturity threshold. Similarly, decades of research on different classes of chemical compounds are required to understand how to optimize their pharmaceutical properties so that they can be efficiently developed into safe and effective drugs and manufactured.
Most of this foundational research is funded by the public sector. Our previous work, for example, shows that the NIH contributed more than $100 billion to research underlying the 210 drugs approved from 2010-2016 and more than $200 billion for drugs approved for the full decade 2010-2019.
Our new paper shows that the discovery and development of remdesivir was no different. The biological target for remdesivir is a protein – RNA dependent RNA polymerase (RdRp) – that copies the virus’ RNA genome into another, RNA copy, an essential step in both viral infection and viral propagation. Blocking this activity with a drug would be expected to curtail the infection. The parent chemical structure for remdesivir is a nucleoside analog (NcAn), a class of molecules that naturally have extremely poor pharmaceutical properties, but have been optimized through decades of research in pharmaceutical chemistry that enables the synthesis of safe and effective nucleoside analog drugs.
We tracked all of the published research on remdesivir’s drug target, RdRp, and parent chemical structure, NcAn through the beginning of the COVID-19 epidemic (December 2019). Then, we determined the amount of funding for this research provided by the NIH. We identified 6,567 research publications on RdRp including 1,263 that had received NIH support totaling $1.9 billion, as well as 11,073 research publications on NcAn, including 2,319 with NIH support totaling $4.6 billion. We also showed that, of the 97 different investigational compounds targeted to RdRp that entered clinical trials as potential therapies for influenza, hepatitis-C, Ebola, or Coronaviruses since 1989, the only three that have been approved, including remdesivir, entered human trials after RdRp research had passed the maturity threshold.
Our data suggests that Gilead’s considerable accomplishment in securing authorization for use of remdesivir in treating COVID-19 represents only the culminating step in a cumulative process of innovation that involved the collective action of public, as well as private, enterprise. While Gilead will likely invest several billion dollars in bringing remdesivir to market, our data suggests that the public sector, in aggregate, has already invested much more.
Patent law and the USPTO recognize the role played by Gilead in the discovery and development of remdesivir. There is, however, no mechanism for similarly recognizing the decades of foundational, basic research that made this discovery possible. The foundation for drug discovery does not rest only on patentable advances, but also theoretical insights, refined details of biological structures or functions, refutation of inaccurate findings, revision of failed experiments, reformulation of essential ingredients, and replication of critical results. Without this diverse and mature body of research, drug development is rarely successful.
Lazonick and Mazzucatohave examined what they term the “Risk Reward Nexus” of innovation and the mechanisms that lead to asymmetrical sharing of risk and reward, not only among individuals and socioeconomic classes, but broadly between the public and private sector. They illustrate this asymmetry with the observation that the “blockbuster biotech drugs that generated huge returns for both big pharma and biopharma companies reflect control over patent rights to the “low-hanging fruit” that became available to these companies in the 1980s as a result of decades of NIH funding.”
Will remdesivir be more of the same?
In an April 30, 2020 letter from Representatives Lloyd Doggett (D-TX) and Rosa DeLauro (D-CT) to Health and Human Services (HHS) Secretary Alex Azar, the Representatives requested “an appropriate accounting of the taxpayers’ investments. … to ensure patients and the federal government are not subject to price gouging….” They note that “Taxpayers are often the angel investors in pharmaceutical research and development, yet this is not reflected in the prices they pay.“ This perspective echoes the observations ofLazonick and Tulum that “the US government has long been the nation’s (and the world’s) most important investor in knowledge creation in the medical field” as well as Mazzucato’s argument that the proper role of government is as the “investor of first resort” in innovation and value creation.
Our work provides some of the accounting requested in the April 30 letter, but it does not answer the question of what would be a fair price for remdesivir. Our findings do suggest, however, that it is not fair for Gilead to determine the price of remdesivir relative to the value it provides to the company or its shareholders, when the public’s contribution to the research that enabled this product is much larger. Rather, our work highlights the critical need for new approaches to valuing all of the intellectual advances that contribute to pharmaceutical innovation and mechanisms for more equitable distribution of the risks and rewards between the public and private sector investments that make innovation possible. Most importantly, as Doggett and DeLauro wrote in their penultimate paragraph, our results emphasize that “The substantial taxpayer investments in COVID-19 pharmaceutical research must be recognized.”
This work was supported by grants from the National Biomedical Research Foundation and the Institute for New Economic Thinking to Bentley University